Retailer’s store will be more than a cannabis store, it will be an experience of the lifestyle portrayed by Life’s branding. Only a small portion of Retailer’s square footage will be dedicated to cannabis products, while the majority of the store will house non-cannabis, Life branded items. This will minimize the non-deductible expenses that are deemed sales/trafficking related and allow for a bifurcation of expenses between non-cannabis and cannabis business lines. The non-cannabis business line will be able to deduct expenses similar to any other business, further reducing the impact of Sec. 280E. (See CHAMPS v. Commissioner)
In this scenario, we would advise that Life either become either a C-corp or S-corp in order to avoid Self-employment tax. This choice would not be cut and dry and would depend on various factors such as the state, tax situations of the individual owners, and fringe benefit desires of the owners among others.